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Newsmakers : Companies told to pull their sox up

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with the first Sarbanes-Oxley (SOX) deadline imminent, analysts and systems vendors paint a picture of companies struggling to comply with regulators’ requirements for higher levels of visibility and transparency into company financials. SOX, with far-reaching implications for financial reporting, corporate governance and public accounting, has been largely US focused, but European companies with US operations are also affected. “European companies are less aware,” notes Jeanne Capachin, a research analyst with Financial Insights.“They are not seeing it in the press like companies are in the US or talking about it among their peers.”

Treasury systems vendor Trema estimates that 43% of DAX 30 companies in Germany have installed its FinanceKit treasury management product, which allows them to drill down into accounting information in real-time. However, Mark Lewis, director of sales support,Trema, says financial reporting by most companies still took the usual two or more weeks, which does not constitute ‘real time’ reporting.“If their processes were correct, come 31 December they would be able to close their accounts and on the 1st of January produce the correct numbers with visibility and transparency without any window dressing. Could it happen that quickly? It may be impossible,” Lewis says.

Capachin says even though companies had invested in technology—Boston-based AMR Research estimates that US public companies will spend $5.5 billion on compliance in 2004—they may still have “islands of reporting” based on Excel spreadsheets.“They need to go through the process that leads to the production of financial statements and make sure they are well documented,”she says.“For companies that don’t have these sound practices, an auditor isn’t going to help.”

In the run-up to the first SOX deadline in November, she says companies should have ensured they have fixed any deficiencies in their accounting processes and tested them.The process will be made even more complex, she adds, for those companies engaged in M&A;, although they had a year’s extension.